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~~~~~~~~ ~J, ~~L~ <br />October 23, 2407 <br />Pamela Arends-King <br />Assistant Director of Finance & Management Services <br />City of Santa Ana <br />24 Civic Center Plaza <br />Santa Ana, CA 92701 <br />Re: GASB 45 -Other Post Employment Benefits (OPEB) Actuarial Study Fee Estimate <br />Dear Ms. Arends-King: <br />Bartel Associates would be pleased to provide the City of Santa Ana actuarial consulting services. This <br />letter summarizes the project scope and our fee estimate associated with the City's retiree healthcare <br />obligation. <br />Background <br />The City participates in the Ca1PERS retirement program providing Miscellaneous employees the <br />2.7%@55 beneft and Safety employees the 3%@54 benefit. The City also participates in the Ca1PERS <br />healthcare program (PEMHCA) providing eligible retirees the PEMHCA minimum contribution using <br />the "5% unequal methad: ' Some employee groups can elect to use accumulated sick leave to pay for <br />retiree healthcare premiums until. these amounts are exhausted. The City does not provide contributions <br />for retiree dental, vision, or life benefits. The City has approximately 942 full-time active employees <br />anal 276 retirees currently receiving healthcare benefits. <br />AB 2544 approved by the Governor an September 30, 2006 changes the way the 5% "unequal method" <br />works. The amount provided to retirees must be a percentage of the amount provided. to active <br />employees where the percentage is 5% multiplied by the number of years that the agency has <br />participated in PEMHCA. <br />In addition, the City contributes a retiree medical subsidy (a percentage of active employees' pay that <br />varies by bargaining group) to a fund to be used to help pay for retiree healthcare coverage. This fee <br />letter assumes these pragrams captain individual accounts and GASB 45 does no apply. However, if <br />these programs do not contain individual accounts then the City should discuss them with its' outside <br />auditor because GASB 45 may apply. <br />The Governmental Accounting Standards Board (GASB) issued Statement No. 45, "Accounting and. <br />Financial Reporting by Employers for Postemploymcnt Benefit Plans Other Than Pensions," called <br />"OPEB" by GASB, in June 2004. I was a member of GASB's task force providing background <br />n.fornaation to the Board on this issue. <br />The City currently pays for OPEB on apay-as-you-go basis. GASB has made it clear the City will need. <br />to reco~ize its retiree healthcare promise as employees render service. It is important to note the new <br />GASB OPEB standards will likely result in net obligations significantly different fmm the City's current <br />lay-as-you-go method. <br />We believe the "5% unequal method" cash subsidy falls under GASB 45 while any sick leave usage is <br />covered by GASB 16, "Accounting far Compensated Absences." <br />25G-9 <br />